Analyst: HOS has led to reduced utilization

Monday, July 15, 2013

Some private fleets have seen a 10-percent degradation in utilization since the federal government's new hours of service regulations were imposed on July 1, according to Cowen and Co.
The hit seems to have less of an impact on the over-the-road fleets, which have reported utilization hits of between 3 percent and 5 percent.
The imposed 30-minute lunch breaks laid out in the rule, which does not allow drivers to take this break while goods are being loaded or offloaded, is contributing to this issue, the firm's Jason Seidl wrote in an industry update report.
This may, however, be a temporary blip.
"We believe that this degradation should get better over time as carriers and shippers work together to make deliveries more efficient, he wrote. "That said, there should be some near-term cost impacts as many carriers are looking to assess the impact before attempting to put through broad or selective rate increases."
Seidl noted the carriers he has spoken with have reported difficulties finding qualified drivers. These carriers are also asking their customers to change delivery schedules to fit the imposed breaks noted in the rule change, which is having an affect on hourly rates for drivers. Sedil thinks that if this trend persists, carriers may have to increase hourly pay to keep total pay for drivers at the same level.
"On the other hand, we believe carriers are unlikely to be able to implement meaningful and immediate rate increases to offset the lowered utilization, as national truckload fleets have not seen the same degradation, demand continues to be lackluster, and capacity has not seen material tightening yet," he wrote.
This truckload tightening may not appear until electronic on-board recorders are mandated next year, he wrote. Prices, then, should stay fairly stable, with Cowen predicting a modest, 2-percent increase for the near term. - Jon Ross